Experts fear more pressure on USD in the coming days

The interbank exchange rate stood at Tk84.15 per dollar yesterday from Tk83.90 in January this year, which was Tk82.96 last year, according to Bangladesh Bank latest data.

The domestic currency has lost value of Tk1.19 against the dollar in the last one year.

There is pressure on the foreign currency market due to more demand for imports rather than exports and remittance earnings. This year import growth is a bit lower, as it was under pressure in the previous fiscal year, central bank officials said.  

To stabilize the foreign exchange market, Bangladesh Bank sold $1.67 billion to commercial banks as of yesterday. The amount in the last fiscal year was to the tune of $2.31 billion, meaning banks bought $190b per month on average from the central bank, according to a Bangladesh Bank senior official.

A handful of private and state-owned banks refused (letter of credit) LCs  to a number of public sector institutions, including the Bangladesh Petroleum Corporation, due to a dollar crisis.

Bangladesh Bank Governor Fazle Kabir, in the midst of this received a letter from the Financial Institution Division of the Finance ministry to take  steps needed to solve the crisis in the volatile forex market.

Reasons for not opening LCs for big projects

Talking to the Dhaka Tribune, Sonali Bank MD and CEO, Md Obayed Ullah Al Masud, said: “Due to a demand-supply gap, we have to face problems in opening LCs for big projects.

“In this case, we have to increase foreign direct investments (FDI). If we get deferred payment opportunities in opening LCs for big projects, then there will be no problem.”

Executive Director of Policy Research Institute of Bangladesh (PRI), Ahsan H Mansur, said: “Before the general election, the central bank sold US dollars because the government needed to stabilize the foreign exchange market.

"But how long can the central bank keep this up?" he remarked. "Since export earnings are not growing compared to imports, the taka must be devalued against the US dollar."

Managing Director of Bank Asia, Md Arfan Ali, said: “Rising exchange rates will put pressure on inflation as the price of imported goods will increase.

"Devaluing the local currency puts pressure on the liquidity market as the settlement of LCs requires more money," he added.  

Arfan also explained there will be more pressure on the US dollar in the coming days for the mega projects to be implemented.

Due to more selling, foreign exchange reserves stood at $31 billion as of March 7, down from $32.27 billion a year earlier.

Some banks selling dollars at high rate, disobeying BB directive

According to central bank officials, the central bank has asked banks to sell US dollars at the same rate as that of the inter-bank currency market rate. Despite this, some banks reportedly sell dollars at a higher rate than the inter-bank currency rate.

For July to December this fiscal year, export earnings rose by 14.01% to $20.16 billion from $17.69 billion, while import payments rose by 5.73% to $27.82 billion from $26.31 billion for the same period in the previous fiscal year (FY2017-18), Bangladesh Bank data showed.